Founder and Editor of The Lanchester Review. Previous or occasional contributor to Telegraph Blogs, Comment is Free, The First Post/The Week, Harry's Place, New Directions, The Brussels Journal, The London Progressive Journal, Labour Uncut, The American Conservative and Russia Today (RT). Available for work via davidaslindsay@hotmail.com, all lower case.

Thursday, 7 February 2013

The Shadow State

The government has "finally woken up from
its post-election slumber", notes Caroline de la Soujeole, from investment bank Seymour
Pierce, "and is open for business … determined to find new, efficient ways
of delivering services rather than cutting them". Huh. Who ever heard of a
government that could cause this much damage while still asleep? But that is by
no means the most wrong part of a short but entirely wrong statement.

By "open for business", the analyst
means the government is outsourcing public services – at a huge rate. The
value of such contracts has risen from £9.6bn in 2008 to £20.4bn in 2012. Seymour Pierce estimates that
public sector outsourcing could hit (deep breath) £101bn by 2014-15.

You can see the existing
contracts wherever you look – helping unemployed people find jobs has been
entirely privatised. It's known as the "welfare market", a peerless
example of double-speak in which people's welfare is ignored and market forces
dominate. The Work Programme doesn't work at all on its own terms – though if,
as I suspect, the true aim is to destroy the standing and the self-esteem of
the unemployed, it is working quite well. That's worth between £3bn and £5bn
over five years. Atos has £3bn worth of contracts, also over five years. The UK
Border Agency issued contracts worth £1.7bn, all to three companies and running
for five years. Probation services are outsourcing 60% of their work, valued at
about £600m a year.

This is all based on the principle that the
public sector is inherently inefficient. Hand it over to private companies and
they will swoop in with their efficiency, their economies of scale, their
incentives and their competitiveness, winnowing it down into a dart of
perfectly targeted public spending.

In practice, when they say efficiency, that
generally means lower wages. When they say economies of scale, that
generally means constructing the contracts in such a way as to leave only the
largest companies eligible to bid for them. When they say incentives, look
closely and you will mainly see perverse incentives. And when they say
competition, what you're actually left with is four or five – sometimes only
three – companies, who barely compete with one another at all but instead
operate as an unelected oligarchy.

Most public services are not about producing
microchips, they're about human relationships – care work, parole, job-seeking,
even assessing whether or not a disabled person is really disabled; they are
about one human being spending time with another. The economist Ha-Joon Chang's
famous example of the pitfall of efficiency is that it mainly
means making things faster – and yet if you played a minuet at three times the
speed, would that improve it?

A much less romantic example, but one that
exists across the country, is being given a bath by a careworker. Your local
authority has signed a contract for care work that's much lower than they
were previously paying in-house. Now your bath has to be undertaken
by someone who doesn't have time to take her coat off. You probably don't know
her, because staff turnover averages 30% in this sector. Whoever she is, she's
probably having to claim housing benefit and in-work benefits, so the public
purse is paying one way or another anyway. Who wins from all this
humiliation, the low-wage trap, and the isolation? Who wins when a waste
management company takes over a contract and bin men are simply paid 25% less
than the bin men three miles away? The shareholder, the private equity
firm that bought out the waste management outfit and sold it on: not you,
not us.

However, it is wrong to suppose that outsourcing
only erodes wages at the bottom. It is a classless foe, and attacks people
right up the pay spine (except at the top). According to Harry Fletcher, of the
National Association of Probation Officers, when Serco won the probation
services contract in London it did so by massively underbidding the public
sector with a view to stripping out 100 of the 550 jobs. Not to worry, you
might think – the others will be covered by Tupe legislation that protects employees when ownership is
transferred; pay, terms and conditions will be unaffected.

But possibly not – when Liberata won the
education maintenance allowance and adult learning grant contract from a number
of local authorities in 2007, scores of people were transferred from the public
sector. It turned out their pensions weren't always protected. Then the company
"restructured", a process that trumps Tupe, and the "scheme leader"
tier was simply removed, which meant a pay cut for many of the most
qualified staff.

Then it turned out that Liberata couldn't handle the contract, but by this time it was so
large that the only other company capable of taking it on was Capita. When the
present government came in and canned EMA, citing "unaffordability",
the galling thing was that private sector bungling had made it quite expensive.
So a government scheme that the data showed had a positive effect on young
people's life-chances was trashed; skilled people were left unemployed;
unskilled people, unemployable. And Capita probably walked away with a wedge
because the coalition broke the contract. "Probably," I say, because
this comes under the umbrella of so-called commercial
confidentiality, so we will probably never know.

What happens when these firms, with their
inexorable expansionist logic, bite off more than they can chew? We pay anyway.
We paid G4S; we will pay it again when its prisons catch fire. We will pay A4e
when it finds no jobs, we will pay Serco when its probation services fail. We
will pay because even when they're not delivered by the public sector, these
are still public services, and the ones that aren't too big to fail are too
important. What any government creates with massive-scale outsourcing is not
"new efficiency", it is a shadow state; we can't pin it down any more
than we can vote it out. All we can do is watch.

No comments:

Post a Comment

About Me

Founder, Proprietor, Publisher and Editor of The Lanchester Review since 2013. Founder, Proprietor (for now), Publisher (for now) and Editor-in-Chief of Lanchester Books since 2014. Charity volunteer and administrator since 1994. Freelance journalist since 1996. Supply teacher and market research worker from 2002 until prevented by disability. Member of the Centre of Theology and Philosophy at the University of Nottingham since 2006. Preventing the University of Durham’s undergraduates’ degrees from getting the way of their education since 2000.
Elected Parish Councillor from the age of 21 until I stood down voluntarily in 2013. During that time, Lanchester was among the first in the country to secure power of wellbeing, power of general competence, and Quality Parish Council Status.
At 21, I began eight years as a governor of a primary school which, at the time of my appointment, still had the same Headteacher as when I had been a pupil there. Three weeks short of 22, I found myself in the same position when I began eight years as a governor of a comprehensive school.
Since May 2013, a member of the Durham’s Police and Crime Commissioner's Community Panel.